April 05, 2008 ... Death Spiral.

When the value of money as spending and/or savings is threatened, unlikely behaviour is often a consequence. When the right to one’s property is threatened, unlikely behaviour is often a consequence. In the case of money, people endeavour to get rid of money as rapidly as possible and convert it into property. As of the beginning of this year, BMW have reported an unexpected rise in sales, as if the economy were on a roll instead of suffering a credit crunch including a real inflation rate of close to 30%, as reckoned against the average rise in the price of gold over the last 9-12 months.

Although converting money into property is a sound way to safeguard and/or minimise the depreciation of the value of money over time, property is under assault in a myriad of ways, which renders this quality of property no more resistant to depreciation than money. Furthermore, property owners are now a hostage to their property in the face of a relentless demand by government including self-organising networks to spread equality and fairness at property owners’ expense. After all, who has any means with which to pay for such programmes.

Until recently, wealthy Germans could make use of Liechtenstein, for example, to avoid paying excessive tax on their wealth. But this practice has now been outlawed. Less wealthy Germans--as per the middle class--could consider property set aside as inheritance to be a store of value, and a way to pass on wealth to their children and /or others deemed to be suitable beneficiaries. However, given the level of inheritance tax and new direct taxes, this option is rendered almost useless.

As a counter to this problem, many German parents now consider it better to pass on earned wealth and/or credit-wealth at an earlier stage. This is evident by the rise in private education as an alternative to state education, which they are also paying for, even though they have chosen private education as an alternative. Many parents know full well that their children may gain nothing of significance over that provided by state education, but at least they have a greater degree of control over how their wealth is allocated and spent, with the possibility that their children will gain some advantage for a more prosperous future than would otherwise have been likely.

Germany has been here before. In the 1920’s the entire German middle class was hollowed out. Germans experienced the ravages of the depreciation of money similar to that of contemporary Zimbabwe. Those who could, converted money into pianos, jewellry and art, for example. Anything that might hold some value. Wealth was hoarded, not saved. Mass emigration was a popular option. Germany is definitely showing the signs of such a catastrophe, and without a rapid change in government policy to reverse the problem, Germany and Germans are going to have a lot more to worry about than Islamic tuition in state schools.